Wednesday, November 16, 2011

Good News on the Economy...Sorta

The U.S. economy, for the last year, can be spoken of in a good news/bad news format. A recent entry in the CuriousCapitalist ( states the obvious: Yes, we are growing, and no, we're not growing fast enough.

The Good and the Bad

Yep, the economy is in fact, creating jobs. In 2011, about 150,000 jobs were created per month. The bad news? We'd like to see 200,000 per month. The good news? With a large number of baby boomers retiring, we might only need about 120,000 jobs created per month to reduce unemployment. The unemployment rate has dropped to 9% now, even with an influx of workers no longer claiming to be underemployed or "discouraged." James Paulsen at Wells Capital finds this encouraging. "The revisions show the economy is not as weak as we thought." Paulsen said. Good news right? Sorta.

While we are growing, our rate of growth is not increasing. The explanation is pretty simple. The housing market is not growing. Foreclosures are high and property values are still declining. A robust housing market spurs many other corners of the economy to grow. Without one, growth is merely marginal. So if people are getting jobs, and thus getting paid, where is the money going? Debt. With consumer and government debt as high as it is, any growth in employment rates will only have slight effects on economic growth. Expect the trend to continue.

No comments:

Post a Comment